Ladies and Gentlemen,
First of all, thank you for the invitation. It is a great pleasure for me to be here in Houston.

The Government wishes to ensure that the petroleum sector continues to be an important contributor to fund the welfare society. In order to maintain the basis for the welfare society, it is vital to have a sound oil and gas industry. In the following, I will address some of the major pre-requisites for a sustainable Norwegian oil and gas industry.

Introduction/Facts on the petroleum sector
During the last 35 year a substantial petroleum cluster has emerged. The cluster includes oil companies, supply industry, research institutions, universities etc. The petroleum industry has grown to become the leading industry in our country.

A few macro figures can serve as an illustration of the petroleum industry's importance to the Norwegian economy. In 2001, oil and gas production exceeded 20 per cent of the gross domestic product and its share of exports was around 45 per cent. The value of petroleum-related goods and services is not included. For the next five years, total annual investments are expected to exceed an average of 7 billion USD. 1Kurs mot NOK: 8,5</P> <P>

The petroleum industry has every opportunity to continue its positive development in the decades to come. There is no doubt that opportunities exist both in Norway and abroad. Norway alone has a potential for another 50 years of oil production, and gas for 100 years. This is quite exceptional for any industry.

However, there is no such thing as a free lunch. Producing our remaining reserves requires substantial investments. New projects must be profitable to be developed, and our industry must be competitive to stay in business.

This will require strong efforts and wise decisions both by the industry and the Government. The industry has the main responsibility for discovering, developing and producing the resources efficiently. But the Government also has a role to play. In my opinion the Government has 4 main instruments:

• Contribute to reasonable producer prices on the petroleum products
• Maintain an effective regulation regime.
• Facilitate research and development of new technology
• Support the internationalisation of the Norwegian oil and gas industry

Let me address these different aspects somewhat closer.

First, oil markets and oil prices.
Reasonable producer prices are a key to our offshore activities. The harsh natural environment offshore Norway contributes to relatively high development and production costs. Thus, reasonable oil and gas prices are necessary for projects to become profitable, and thus for Norway to remain an attractive investment area for the oil companies.

We see it as important to maintain stability in the oil market, with prices on a level that may be acceptable as well for both oil importing and oil exporting countries. At the end of last, year the oil market was oversupplied, and there was a risk of a significant drop in prices. Therefore, we decided to reduce our oil production in the first six months of this year. The decision was unilateral and not part of any formalised agreement with OPEC or producers outside OPEC.

Regulatory Framework
There is a continuous work in the Ministry to maintain an efficient and competitive regulatory regime. In the last couple of years this work has resulted in several changes in the regulatory framework, and I will just mention some key items:

Two years ago, the Ministry did a thorough examination of the regulatory regime. The industry was involved in the process, which ended up in two very important aspects; simplified regulations and increased predictability.

Last year, Statoil was partly privatised, Petoro, the company administering the State's Direct Financial Interests - SDFI - and Gassco – the new gas transport company - were established, and an evaluation of the fiscal regime was performed. In March this year, the restructuring of the SDFI portfolio was finalised.

Eventually, the organisation of the gas transportation system is currently being evaluated.

Technology
On the Norwegian Continental Shelf, we are faced with growing complexity of offshore operations, daunting deepwater challenges, but also a unique potential for value creation. This tells us that sound policies are needed to facilitate technology development.

One of the major principles of the Norwegian Government has been to encourage links between the oil companies, supply industry and research institutions. We have shown the ability and willingness to work in dynamic networks with international players. This approach has produced a strong cluster performance, and Government funding has proven to be a catalyst in such a framework.

"DEMO 2000", a programme on project oriented technology, is a recent model in this respect. Technology is to be demonstrated based on a proposal by the supplier industry and a need expressed by the oil companies. Through pilot testing the aim is to commercialise innovative solutions that can bring down costs and boost revenues within a short time span. Government financing has leveraged funds supplied by the two industry parties with a split of 1 to 4.

The Ministry of Petroleum and Energy, in co-operation with the industry and the Norwegian Research Council, is now aiming at a national strategy for research and development for oil and gas in the 21 ^st> century, named OG21. In August last year, a permanent organisation for OG21 was established to develop a national strategy reflecting our main challenges.

By exploiting the cluster dynamics, OG 21 represents a stronger and more unified system for R&D, including demonstration and commercialisation of new products. OG21 has defined five priority areas for its future work:

• Improved recovery
• Environmental protection
• Deep water
• Small fields
• The gas value chain.

I would like to highlight two areas:

First, technology for improved recovery. The average recovery factor has now levelled out at around 44 per cent for oil fields. But the objective is to attain an average factor of 50 per cent. For gas we aim at 75 per cent. Reaching these targets imply the use of technology that is not available yet. Exchange of knowledge and best practice between Norwegian fields and other petroleum provinces must be an important contribution in this process. In this respect, the Gulf of Mexico is an outstanding reference case.

Second, technology development is also a crucial part of solving the environmental challenges we are facing. Many of the technical solutions that have been developed are improving the economic performance as well as bringing substantial environmental gains. It is important to promote and encourage further technology development that has this dual effect. Such technology should also have a great potential in the global marketplace.

Internationalisation
The global market for petroleum related goods and services is significant. According to Norlan Consultants, the offshore market should grow by 30 per cent over the next four years to reach 110 bn USD in 2005.

The Gulf of Mexico for instance is expected to be one of the major growth areas.

It must be an ambition to be part of the international market. In this way, the industry can create new and diversified business opportunities. Moreover, it can bring back new know-how to benefit operations on the Norwegian Continental Shelf.

In co-operation with the domestic petroleum industry, the government established the Intsok – Norwegian Oil and Gas Partners foundation in1997 to promote deliveries to the international market. Currently embracing 84 companies, Intsok aims to boost revenues from abroad to 6 billion USD by 2005, compared with the current level of about 3,8 billion USD. Such growth will require a substantial and purposeful commitment. Thus, for the government budget of 2002, we have appropriated about 1,8 million USD to support the internationalisation of our petroleum industry.

Konkraft
The abrupt fall in oil prices in 1998/99 and the global restructuring in the E&P business have presented new challenges. Combined with he gradual maturing of the Norwegian Continental Shelf, this has made it imperative to establish a closer dialogue between the players in the petroleum cluster. A process called Konkraft, has been established to this end. Konkraft means competitiveness in Norwegian.

To co-ordinate this process a forum for top executives was established in September 2000. This body embraces more than 20 prominent leaders from oil companies, suppliers, trade unions, research institutions and government bodies, including the Ministry of Finance and The Ministry of Environment. It is an honour for me to chair this forum.

The mandate for the forum is to identify and initiate projects to strengthen the competitiveness of the Norwegian Continental Shelf and the oil and gas industry. Various projects have been launched and actions taken, for instance related to conflict resolution, marginal fields and the rig market. In addition, the forum will monitor established initiatives within resarch, internationalisation, safety and environment.

One important activity initiated by Konkraft is to regain the respect and promote the interest for the petroleum industry, especially with young people, in order to attract them to petroleum related education. In my opinion this is a key element if we are going to be successful in further developing a sustainable cluster within our industry.

Conclusion
I am optimistic about the future of the continental shelf, and that we will be able to have a prosperous oil and gas industry for the next 50 to 100 years. However, good results depend upon co-operation with national and international actors. We need to continue developing our domestic industry, but along with that we depend on active participation from our international partners.

Therefore, I find it encouraging that there is a thriving Norwegian oil and gas community here in Houston. This is an excellent place to seek inspiration, partnerships and business opportunities. And I am sure that the Norwegian-American Chamber of Commerce is a driving force in this process.

Thank you for your attention.